Create a Social Networking Site and Monetize it

The Market

Social Networking sites like Myspace, Facebook, Linkedin and others are the buzz of the day.  But more than being the buzz of the day, they are the faster growing segment on the internet today.  Additionally, the founders of these companies seem to enjoy unprecedented wealth valuation in only a few short years.

Facebook Founder Mark Zuckerberg, at age 25, is now worth an estimated $2 billion and is now placed at #158 on Forbes list of wealthiest people in the world, according to Forbes.com.  He’s the youngest self-made billionaire ever since Forbes has started publishing this list.

According to Nielsen, a respected consumer and business research organization, in their March 2009 Social Networking Global report – Social Network grew twice as fast as email, search and any of the other popular online sectors.  Just think about that … I (and everyone that I know) use email and search everyday and cannot live without them on a daily basis.  But Social Networks grew twice as fast last year.

Nielsen also reported that ‘Time spent on Social Networks and blogs grew over 3 times the rate of overall internet growth’.

But is Social Networking mainly for crazy American teens, as some would suggest.  No, Nielsen reports.  Their report further concluded that ‘The greatest growth for Facebook has come from people aged 35-49 years’.  They also found that ‘The number of unique visitors who are 65 or older on social networking and blog sites has increased 53 percent in the last two years alone.’  Facebook is the #3 most visited destination for people who are over 65 years old, according to Nielsen.

I make these points to illustrate that we’re at the beginning of a global phenomenon… not the end.   That this could be a significant shift in how we communicate, network, and interact with each other on a local as well as on a global basis.  But this is not just an American phenomenon.   Germany had the ‘strongest growth’ for online communities according to Nielsen.  The UK, Spain, Italy and Switzerland also had very strong growth, according to Nielsen.

The Opportunity

Given the above facts, one may ask themselves, ‘is it possible to create a similar site or business to take advantage of this trend?’  And, is it possible to still create a successful business from this technology or is it too late?  Because, make no mistake.  Myspace is not just a website.  It’s a business!  Facebook and Linkedin are not just places to network, they are global businesses.  Both rSitez.com and Ning, social networking website providers, announced over 150% percent growth in 2009 – that’s more than doubling the business they did before the recession.  These are businesses expanding at an incredibly rapid pace in a global market, even during the worst economy in our lifetime.

Facebook, Myspace, and LinkedIn are some of what we consider the ‘first wave’ sites.  They paved the way for other sites and benefit from this by having tens or hundreds of millions of members.  These mega sites will most likely be around for a long time and will continue to grow globally as long as they continue to provide value to their audience.

However, we’re now seeing what we consider the 2^nd wave of social networking sites.  These sites are niche social networking sites.  They cater to specific groups and niches, instead of a general product like Myspace or Facebook.   To be successful, sites like these will need to cater to the specific needs of a targeted group or audience.  They will need to provide more than technology.  They will need to provide true value and hopefully solve specific problems faced by this niche or affinity group.  In many cases, providing technology will not be enough.  They may need to provide related services as well.  By providing the appropriate technology and targeted services, these sites will be able to prove value and as well have options to monetize this value.

For members of these niche sites that provide real value, it will not be a choice of Facebook or this targeted niche site for consumers.  It will most likely be Facebook AND one or more targeted niche site.   The reality is that no one particular site will serve ALL our needs.  We will most likely belong to multiple sites that serve different needs.  A musician, for example, may use Facebook to keep up with friends, but may go to a site like GenNextMusic to listen to or sell his own tracks, but then post and manage his business profile in LinkedIn.

Therefore, entrepreneurs who understand this opportunity and create a specific niche social networking site to target a specific audience that they can add value to, still has the ability to create a successful online social networking business even today.

In Part 2 of this article we will discuss the technology and leading vendors that you can use to create your own niche social networking site and the advantage and disadvantage of the different ways you can create your site.

About the author
Rohan Hall is the Founder/CEO of rSitez, Inc. (www.rsitez.com), a technology firm that helps entrepreneurs create unique revenue-based social networking sites. He is the author of Stop Working, a book that teaches entrepreneurs how to use technology, globalization, and networks to build a global business. He has developed technologies for a wide range of entrepreneurs and Fortune500 clients including HP, Corning, Oracle, Honda and various others.

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